Target: ₹360

CMP: ₹284.4

While the merger with Sony has the potential to transform the company into a media titan, a key overhang with respect to its single largest investor - Invesco is now behind after it gave the green signal to the merged entity as being value accretive to shareholders.

With a capital infusion of ₹11,300 crore from Sony, the combined entity would be able to leverage the large opportunity in the Digital Entertainment space given its ability to create content across genres and linguistic markets despite the dominance of Amazon Prime, Hotstar & Netflix.

The Zee–Sony combined entity’s linear channel portfolio would comprise of a wide array of genres and languages with 75 channels. Its combined revenue at ₹13,300 crore (FY21) would include network/revenue market share of 27 per cent/37 per cent, with an estimated 35 per cent EBITDA margin in the linear business (₹5,000 crore), a TV Broadcasting business that is larger than that of Star (exIPL). Unlike the West, India’s Broadcasting market is still seeing a rise in TV penetration at 66 per cent, with the time spent watching TV growing 7 per cent in CY20.

The merged entity can pose a big threat to the biggies in the OTT space namely – Netflix, Amazon Prime and Hotstar through its differentiated content targeting the niche regional, mass and tent-pole content, rather than just following the footsteps of the leading players.